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Clarifying facts on the 95 mills tax

by John Esp
| November 7, 2023 12:00 AM

Recently opinion pieces and information sent to legislators regarding the counties decision to levy 77.9 mills instead of the state directed 95 mills has been circulating in both statewide newspapers, and internal legislative correspondence.

It appears that the message being distributed is counties are giving large tax breaks to corporations and out of state homeowners while doing little for the average Montanan. While the numbers can be interpreted to support that message, and they (the numbers) are in fact accurate, they only tell part of the story.

Forty-nine of the 56 counties have, in my opinion, rightfully decided to levy the mill levy required by the property tax limitation law. That law allows property taxing entities to only collect enough property tax to increase their collections by ½ the rate of inflation on their property tax base minus new property.

Counties, cities, and schools (which make up about 85 percent of the property tax collections) have lowered their mill levies to comply with that same and other Montana laws. By doing so they have already lowered property taxes for homeowners, small businesses, large businesses, and out-of-state property owners. By levying 77.9 mills instead of the state directed 95 mills, those reductions will expand to include the remaining 15 percent of property tax collections.

Just to use my personal tax bill as an example, the county portion of my bill went down from $1,141 in 2022 to $1,029 in 2023, the school portion of my bill went up from $625 in 2022 to $857 in 2023, and the state portion went up from $506 in 2022 to $589 in 2023. If the additional 17.1 mills are mandated by the courts to be added to my bill then the state portion will increase to a whopping $719. This, at a time state coffers are awash in hundreds of millions in cash. Explain that one to my wife, my siblings and my neighbors. I sure can’t.  

Any time that a taxing entity lowers mill levies, all property owners in their jurisdiction get the same percentage reduction in their taxes. So, broad based tax relief is spread across all taxpayers. Because mill levies are proportionate, taxpayers with large bills get more dollars in tax relief, but not a higher percentage of tax relief. A large corporation may get over a million dollars in tax relief with a lower mill levy, but to do so they must be paying many millions of dollars in taxes. 

I’m going to use the good representative’s example of a large corporation, NorthWestern Energy, and their purported “savings”.  NorthWestern Energy doesn’t pay property taxes; they pass them directly on to their ratepayers. In my district the vast majority of my constituents are ratepayers of NorthWestern Energy. If my math is correct based on the representative’s statement, NorthWestern’s ratepayers would still be paying north of $20,000,000 across the state in property taxes for the reduced mill levy.

When I first came to the Legislature, my party was in favor of lower taxes across the board. We favored broad-based tax reform. It now appears we advocate for favoring one class of property taxpayers over another. I don’t think that is sound tax policy, and if it is, it surely doesn’t make sense to me.  

By advocating for increasing the statewide mills by 17.1 mills those proponents are making the statement that it’s acceptable to raise property taxes on all Montanans in order to collect additional taxes from a select minority of the property tax payers. 

The 17.1 mill increase being promoted raises about $80 million per year. Almost $47 million of that increase is paid by residential property owners. Another $8 million is paid by commercial property owners, our small businesses. About $5 million will be paid by centrally assessed electrical distribution and pipeline companies. 

As I said, a large percentage of those taxes will ultimately end up being added to consumers’ utility bills. 

In this unusual year when there have been such large increases in residential and commercial property values it would seem best to take a conservative approach, as 49 counties chose to do, and keep all the mill levies and thus our taxes as low as possible.

Sen. John Esp, R-Big Timber is chair of the Senate Finance Committee.

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